Daily Variation, Capital Market Efficiency and Predicting Stock Market Returns

Abstract

Studies of capital market efficiency are important because they infer that there are predictable properties of the time series of prices of traded securities on organised markets. We examine the weak form of the efficient markets hypothesis to indicate its usefulness in terms of the results of this study. Furthermore, this study of individual securities prices of traded securities on organised markets corroborate previous findings of studies of stock market indexes both in the United States and for foreign stock exchanges that daily patterns are present in the times series of securities prices. You will note also, that the models identified reflect the closing prices on one day less the closing price on the previous day. In this way, we study returns and not average or closing prices.

Citation

Jarrett, J.E. and Kyper, E. (2005), "Daily Variation, Capital Market Efficiency and Predicting Stock Market Returns", Management Research News, Vol. 28 No. 8, pp. 34-47. https://doi.org/10.1108/01409170510784940